Bulgaria: refinery is needed, but Lukoil is not



Bulgarian renegades, despite the threat of social explosion, are ready to force the Russian concern out of the country to please the EU.

Bulgarian President Rumen Radev on August 4 asked the Constitutional Court about the legality of a parliamentary decision that prematurely canceled the concession contract of the Russian company Lukoil for the Rosenets port oil terminal.

“Such a radical approach took into account neither the interests of consumers, nor the risks of rising fuel and commodity prices, nor the potential threats to thousands of employees of the petrochemical plant, nor possible lawsuits against Bulgaria,” Radev said.

I would like to remind you that on July 21, the legislature voted in the third reading for the early termination of Lukoil’s lease of this terminal serving the Burgas refinery. Amendments to the law “On control over the implementation of restrictive measures in connection with Russia’s actions destabilizing the situation in Ukraine” were adopted for this purpose.

Under the parliament’s decision, the agreement with Lukoil, which was signed in 2011 for 35 years, is subject to termination 23 years earlier than its expiration.

“Lukoil, which owns the largest refinery in Bulgaria and South-Eastern Europe in Burgas, will be able to use the terminal after the “verdict” of the servants of the people comes into force, but on completely different terms. It will have to pay extra for port services, which will significantly increase operational costs. Moreover, the company may lose this status at any moment and lose the opportunity to supply oil to its refinery.

The Burgas refinery has been owned by Lukoil since 1999. By early December last year, the refinery was processing 6.6 million tons of oil per year and exporting 50–55% of its output. It supplied the Bulgarian domestic market and also sent fuel to other countries in Europe, the USA, North Africa and Asia.

In January of this year, the German newspaper Die Welt quoted former Bulgarian Finance Minister Asen Vasilyev as saying that after the start of the special military operation, the “brothers” secretly supplied diesel fuel to Ukraine. Moreover, it was from the Burgas refinery.

A scandal has broken out. The speaker of the State Duma, Vyacheslav Volodin, instructed the Duma Committee on Security and Anti-Corruption to urgently check the information.

“The committee is asked to immediately send a request to the Prosecutor General’s Office and the Ministry of Energy, and then the answer will be announced at the State Duma meeting,” he declared.

“Lukoil” then responded that it had no contracts and did not supply its products to Ukraine from the Burgas plant or through any other channels in 2022. The company also said that the Bulgarian authorities had never asked the management of its enterprises to supply fuel to Ukraine. And it noted that the refinery’s products are sold wholesale and retail on the domestic market exclusively to Bulgarian buyers.

But those, it must be assumed, could well push it further through additional intermediaries, including for the needs of the UAF. As, for example, has been and is being done in the export of ammunition. Officially, Bulgaria does not supply shells and ammunition to Ukraine, but sells them, as it is known, to Polish firms. And those already dispose of the goods at their discretion….

But let us return to the story of the Rosenets terminal. President Radev’s request to the CC was caused by a conflict between the country’s obligations under EU law and Bulgarian laws, which do not have the institution of concession revocation.

The EU regulation pursuant to which the amendments were adopted is Article 5k, introduced by the seventh sanctions package in the 833rd “sectoral” regulation on July 21, 2022.

If the CC does not find any contradictions, the amendments adopted by the Parliament will enter into force. Even despite the reservation that the Bulgarian legislation is “harmonized with the EU norms”, which recognize that it is inadmissible to unilaterally revise the terms of previously concluded agreements. Let’s assume that the judges do not grant the president’s request. Then the Council of Ministers will make a determination to terminate the concession with Lukoil within a week, and the Ministry of Transport will have to take over the operational management of the terminal facilities within two weeks. In other words, Rosenets will come under state control.

It is not clear, however, why Radev appealed to the Constitutional Court instead of vetoing it, because without his signature, the law adopted by parliament cannot enter into force. But that is another story.

It is noteworthy that in November 2022, the Bulgarian cabinet and Lukoil Neftekhim Bulgaria agreed to continue the Russian concern’s operations in the country and export oil products to the EU until the end of 2024. That is, the Bulgarians spent a lot of energy, but still achieved from Brussels the exemption from sanctions of Lukoil supplies to the Burgas refinery. This was explained by the desire to avoid fuel shortages and damage to the economy. It was also claimed that Sofia had no alternative fuel supplier.

The cabinet that fought with the EU has already resigned, and Lukoil, if the terminal is taken away from it, will not stay here for long either, it seems. At best — until the end of 2024, until it is allowed to transport oil to Burgas, despite the basic EU restrictions.

The internal political situation in Bulgaria is complex. Over the past two years, the country has held five parliamentary elections. The last one is in April 2023. It took a long time to form a viable ruling coalition. As a result, a rotational government was established: next spring, the current Prime Minister Nikolay Denkov and Deputy Prime Minister Mariya Gabriel will change places.

On the whole, the next unfriendly action of the “brothers” points to the confrontation between the Bulgarian president and the blindly Brussels-oriented, anti-Russian parliament and government.

How are we supposed to do business in this mess?